When it comes to David and Goliath battles involving banks, there is usually only one winner.

But the curtain has just come down on a 10-year morality play which saw property developer Derek Carlyle bankrupted, lose his house, be castigated in the press and given a record 12-year bankruptcy restriction order….then this week, two years after an extraordinary victory in the land’s highest court, receive a seven-figure damages settlement from taxpayer-owned Royal Bank of Scotland.

Derek’s case was highlighted for five years by Simon Bain, The Herald’s award-winning business correspondent and personal finance editor until he retired six months ago and began working for the Young Money Agency and this blog.

The Herald reported how Derek and his lawyers fought back against what his MP called a “personal vendetta” by bankers in the notorious RBS Global Restructuring Group, which was subsequently to be investigated by Parliament.

The campaign also put the spotlight on how banks can normally rely on Scotland’s legal system for support, with solicitors unwilling to act against them, and sympathetic judges.

How Derek Beat Goliath

Simon Bain

In March 2010 I was invited to the offices of a small law firm to hear about their cases involving small businesses and banking.

In 20 years writing about customer disputes with banks, this was a first – lawyers taking on the banks? Surely not!

But partner David Calder and associate Cat MacLean at MBM Commercial told it how it was – and it wasn’t pretty.

They were acting for a series of entrepreneurs with serious complaints about commercial bullying bordering on the vindictive – by the state-owned Royal Bank of Scotland.

What grabbed my attention was when they said most law firms would not act against banks. I later called a friendly lawyer or two, who confirmed that “conflict rules” prevented most of Scotland’s bigger firms from acting against the big banks.

MBM had won an important victory in the Court of Session in January 2010, defending a £2m claim by RBS against property developer Derek Carlyle for an unpaid debt.

Lord Glennie upheld Carlyle’s defence that RBS had reneged on a promise to lend him £700,000 to complete a housing development, opening the way to a £3m counter-claim by the developer against the bank.

It was an unexpected blow to RBS, which had taken extreme measures to ensure that its customer of 20 years standing would not be able to stand up against them in court.

Plans to “destroy” Carlyle

The bank’s tactics were revealed by Carlyle’s Lanarkshire Labour MP Jim Hood in a blistering attack on RBS in the House of Commons on 10 March 2010.

He said that in August 2008 RBS had suddenly told Carlyle to repay a £1.45m loan within 24 hours or it would “destroy” him.

“The bank’s solicitors then embarked on a series of actions that is shocking. In a short space of time Mr. Carlyle’s bank accounts were frozen, his company forced into administration, his assets seized, and action to repossess his family home commenced.

“Not satisfied with that, the bank manipulated a personal account used for school fees so that it became overdrawn, resulting in payment of Mr. Carlyle’s children’s school fees not being honoured.”

Another project was seized, and sold by the bank at less than half its previous value.

“The unjustified attack resulted in the chaos and destruction that the bank had intended, destroying the man’s business and causing horrendous damage to his personal life and reputation.

“Since the beginning of August 2008 the bank has bullied and intimidated Mr. Carlyle’s usual solicitors, threatening them with destruction of their business practice, which resulted in their withdrawing from acting for him in this matter.”

The MP said he was “horrified by the inexcusable and underhand tactics adopted, both personally and professionally”, adding: “The taxpayer should not be funding personal vendettas by bank personnel.”

RBS had been backing Carlyle and his ventures for the past 20 years. As with earlier deals, he was told on the phone by his manager in February 2008 that a deal was “all approved” and he could go ahead.

Lord Glennie agreed that the bank should have kept its promise. He accused RBS of a “lack of candour” in its evidence about what happened – judge-speak for telling porkies or, as Jim Hood suggested, “lying through their back teeth”.

After the judgement MBM Commercial was on the offensive, believing it opened the door to claims by other businesses.

Now Carlyle’s bankers in the RBS Global Restructuring Group – under investigation by the government for the past four years – were seriously angry!

RBS appeals – and engineers a record bankruptcy order

First RBS, unused to not getting its own way in court, appealed to the Appeal Court, but took its time, hoping perhaps that Carlyle would disappear before the case reached the court years later.

Next the bank was instrumental in getting a draconian 12-year bankruptcy restriction order slapped on Carlyle – a record in a Scottish court. The bank had alleged that its customer had breached an agreement in failing to hand over the £564,000 proceeds of a property sale in August 2008 (the month it pulled the plug on him) – but the bank was never able to produce such an agreement. The bank even used private investigators to produce evidence – gleefully aired in the tabloid press – that Carlyle had squandered the cash on a ‘party lifestyle’.

Finally, when Carlyle appealed to the Scottish Legal Aid Board for funding to defend himself in the Appeal Court, RBS lodged objections, hoping to finish him off.

I reported in May 2013 how the legal aid board had refused aid, but noted that Carlyle’s bankruptcy trustee had failed to disclose fully his real assets.

That morning RBS asked three judges to allow the appeal to go ahead immediately – Carlyle would have to defend himself, with no lawyer, while the bank employed the services of the Dean of Faculty, the most senior lawyer in Edinburgh. But the judges sensibly refused, asking the SLAB to investigate further.

The SLAB changed its mind and allowed legal aid. I sat in the Appeal Court for two days in July 2013, as three judges listened sympathetically to the bank’s case. A promise in a phone call could not possibly constitute a contract, the bank’s QC said. Lord Carloway, presiding, appeared to agree.

In September, the judges ruled in the bank’s favour. RBS’s behaviour may have been unethical, they effectively said, but it wasn’t illegal.

Now, surely, it was all over.

Derek fights back at the Supreme Court

But incredibly, MBM Commercial secured permission, support from the SLAB, and some private insurance-based funding, for the case to go on to the Supreme Court.

The firm’s head of litigation Cat MacLean, a judge’s daughter, had meanwhile been named ‘Solicitor of the Year’ for the firm’s campaigning activities.

And she was to win the award again after the Supreme Court in London, in March 2015, ruled that the Edinburgh appeal judges were wrong to have overturned Lord Glennie’s original judgement.

Derek had beaten Goliath, despite Goliath fighting dirty. The bank dug in for a final round, taking two years to agree a settlement of his £3m claim for damages. This week RBS said ‘the bank and Mr Carlyle are pleased that they have been able to agree terms of settlement’.

The case has cost the taxpayer up to £4million. As far as we know, the bankers behind the campaign of vengeance are still working inside the bank.

Intriguingly, Carlyle’s QC has said the landmark Supreme Court result might not be easy to repeat, as it went against the grain of Scotland’s legal system.

Scottish courts “protective” of banks

I reported in 2015 how Roddy Dunlop QC told a conference staged by MBM Commercial that public disquiet with bankers tended not to be matched by the Scottish courts, which had appeared “protective” of banks.

He warned that in Scotland there would soon be no automatic right of appeal to the UK’s highest court. It could only be granted by the appeal court itself headed by Lord Carloway. “You (now) have to go to Lord Carloway to ask his permission to appeal against one of his decisions,” the QC said. “It may be that there is an attitude that makes it more difficult to rely on cases such as this, we will have to wait and see.”

It is not an isolated case.

Lawrence Tomlinson the government’s Entrepreneur in Residence was asked by the government to produce an independent report on the Global Restructuring Group in 2013, and concluded that it had systematically destroyed thousands of small businesses. The motive, of course, was to desperately shore up the bank’s finances, which had been destroyed by the 2008 financial crash.

When the report came out, RBS called in all Tomlinson’s loans and shut all his accounts!

Last October internal RBS e-mails emerged suggesting that GRG was encouraged to ‘provoke a default’, and over 12,000 businesses suffered. Tomlinson commented: “The RBS files show the Royal Bank of Scotland, and its executives, took the opportunity to make profit from businesses in distress whilst telling them that they were there to ‘help’. Three years ago I called for an investigation into the behaviour of GRG. Since then, we have been waiting for the results of the Financial Conduct Authority’s (FCA) review.”

The regulator drags its heels

We are still waiting. The FCA is said to be about to let the GRG off the hook, claiming to have found “no evidence” of the allegations. Yet as long ago as March 2010, lawyers were telling me that here in Edinburgh, in this one small corner of the land, the evidence was indisputable.

Campaigners say the economy is still suffering the consequences, not to mention the human misery inflicted. Yet despite the Supreme Court triumph, nobody, it seems, will ever be held to account for Goliath’s reign of terror – and it was funded by you and me.

I have read the above and found it very upsetting but also uplifting.
Simon Bain has exposed what is going on in the courts and the fact that the banks do as they please.

i am disabled and the Halifax Bank have stolen my family home, No warrants,court orders etc.
i am not being given my human rights and the bank and their solicitors are trying to stop me from getting justice in the courts!